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ADA Quick Tips - Tax Incentives

TAX INCENTIVES are available to encourage compliance with the Americans with Disabilities Act (ADA). This chart includes the Federal tax incentives and encourages you to inquire whether your state offers similar incentives. Unfortunately, many business owners and employers are unaware that these incentives exist. Make sure your business takes advantage of these valuable incentives!

Name

Code / Publication

Eligibility

Purpose / Examples

Amount

Architectural / Transportation Tax Deduction

Code: Section 190: Barrier Removal

IRS Publication: 535, Chapter 7

All businesses

Removal of physical, structural, and transportation barriers

Ex: widening doors, building ramps, modifying vehicles

Max = $15,000

Small Business Tax Credit

Code: Section 44: Disabled Access Credit

IRS Form 8826

Small businesses

Most expenses to comply with the ADA, including barrier removal, providing auxiliary aids/services, and accommodating employees

States often offer additional tax incentives. Please contact your state tax office or your regional ADA National Network Center to learn more about these state-wide incentives.

Did you know?

► A small business is one that has 30 or fewer employees OR $1,000,000 or less in gross receipts from the previous year.

► If a credit exceeds the amount of taxes owed, businesses may carry forward the unused portion of the credit to the next year.

► Small businesses cannot claim a tax credit and deduction for the same dollar spent; however, they can use the incentives in combination, provided that the expenditures incurred qualify under both. See Example C.

Example A, Credit: Restaurant ABC employs 25 individuals, and its gross revenue for last year was $3,000,000. It qualifies as a small business with fewer than 30 employees. Last year, ABC provided Braille and large print menus (an auxiliary aid), costing a total of $1,500. ABC removed physical barriers to the restaurant’s entrance and modified its transportation shuttle, totaling $8,000. Each of these expenditures qualifies under the Disabled Access Credit. To calculate ABC’s tax credit, start by adding the total amount spent on accessibility ($8,000 + $1,500 = $9,500) and subtract $250 ($9,500 - $250 = $9,250). Divide this amount by two ($9,250 / 2 = $4,625) to find the amount redeemable as a tax credit. ABC earned a tax credit of $4,625.

EXAMPLE B, DEDUCTION: Corporation XYZ removed barriers to its building two years in a row. Although the corporation deducted $4,000 from its taxes last year, XYZ spent money on an additional barrier removal project this year. This is an annual tax incentive, so XYZ is eligible for another tax deduction. XYZ removed all barriers from its bathrooms this year, which cost $8,000. XYZ is able to deduct this amount, $8,000, dollar for dollar, from the amount of money on which it pays taxes.

Example C, Credit & Deduction: Small business QRS spent $20,000 on access improvements by modifying their restrooms and front entrance. These expenditures qualify under both the tax credit and deduction, so QRS can use these incentives in combination. QRS may first take a tax credit of $5,000 (based on $10,250 of expenditures) and then deduct $15,000 (the difference between the total expenditures and the amount of the credit claimed).